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Frenkel Topping Group PLC  -  FEN   

Interim Results

Released 07:00 05-Sep-2018

RNS Number : 7532Z
Frenkel Topping Group PLC
05 September 2018
 

5 September 2018

Frenkel Topping Group plc

("Frenkel Topping" or "the Company")

 

Interim Results

 

Frenkel Topping (AIM: FEN), a specialist independent financial advisor and asset manager focused on asset protection for vulnerable clients, announces its interim results for the six months ended 30 June 2018.

 

The first six months of the year was a period of stable trading following team changes in 2017. Significant investment in developing staff will begin to contribute to earnings in the second half and following years. Important investment in marketing helps maintain relationships and will add to future earnings. Current trading is in line with expectations and the Board remains confident of the Company's growth prospects.

 

Financial Highlights

·     Revenue £3.6m (H1 2017: £3.6m)

·     Recurring revenue of £2.9m (H1 2017: £2.9m), representing 81% of total revenue

·     Gross profit of £2.1m (H1 2017: £2.3m)

·     Profit from Operations (before share based compensation and reorganisation costs) of £0.9m (H1 2017 £1.1m)

·     Statutory pre-tax profit of £0.3m (H1 2017: £1.0m), reflecting investment in trainee consultants, the graduate academy and marketing.

·     Basic EPS of 0.32p (H1 2017: 1.02p)

·     Cash from its operating activities during the period of £0.5m (H1 2017: £1.0m; FY 2017: £2.0m)

·     Net cash and cash equivalents at the period end of £1.8m (as at 31 December 2017: £1.9m), after payment of final dividend £0.6m.

·     Interim dividend of 0.32p per share (H1 2017: 0.2969p), reflecting Board's confidence in the Company's growth trajectory

 

Operational Highlights

·     Continued momentum in core business with new AUM added ahead of management expectations, particularly those under a DFM mandate

·     Assets under management £759m (as at 1 June 2017: £752m)

·     Assets on a DFM Mandate £312m (as at 31 December 2017: £291m)

·     All model portfolio strategies in Investment Management division have achieved positive returns.

Board Changes and Composition

·     New independent non-executive director, Tim Linacre, appointed on 19 June 2018, replacing Mark Richards

·     Paul Richardson today moving from Executive Chairman to Non-Executive Chairman

·     Board now consists of two non-executive directors, Paul Richardson and Tim Linacre and three executive directors, Richard Fraser, Stephen Bentley and Mark Holt

 

 

Paul Richardson, Non-Executive Chairman of Frenkel Topping, commented: "The Board is confident that, following a significant period of investment in the Company's systems and personnel, the Company will return to growth in the coming quarters. This will be delivered through the three arms of our business: our core activities in Frenkel Topping; our general advice business, Obiter Wealth Management and our investment management arm, Ascencia. Despite these significant levels of investment, Frenkel Topping has retained strong operating margins and cash flow, demonstrating the strength of the established underlying business.  We remain focused on reaching AUM of £1bn and expect that a combination of organic growth and focused acquisition strategy will accelerate the growth of the business and strengthen the existing platform."

 

"I joined the Board almost 12 months ago after it had decided that selling the business was not in the best interest of shareholders and after my predecessor had decided to step down. Once on board, the executive team worked together to develop and implement the strategy and culture for growing the business as I have explained in my previous reports, and significant progress has been made with the implementation of those plans. Having achieved this, it is now appropriate that I step back from the role of Executive Chairman and into the more traditional role of Non-Executive Chairman. This change is made with immediate effect."

 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

 

For further information:

Frenkel Topping Group plc

www.frenkeltopping.co.uk

Paul Richardson, Non-Executive Chairman

Richard Fraser, Chief Executive Officer

Tel: 0161 886 8000

Stephen Bentley, Chief Finance Officer

 

Mark Holt, Commercial Director

 

 

 

finnCap Ltd

Tel: 020 7220 0500

Carl Holmes/James Thompson (Corporate Finance)

Tim Redfern / Richard Chambers (ECM)

 

 

 

TB Cardew

frenkeltopping@tbcardew.com

Tom Allison

Shan Shan Willenbrock

Lucy Featherstone

Tel: 0207 930 0777

Mob: 0777 584 8537

Mob: 07789 374 663

 

About Frenkel Topping: www.frenkeltopping.co.uk

 

Frenkel Topping provides specialist independent financial advice focussed on asset protection for clients. The specialist independent financial adviser has a market leading position providing advice and fund management services for personal injury trusts and clinical negligence awards and is well placed to provide services to a wider customer base.

 

The Company provides a range of wealth management services including bespoke investment portfolios, personal and corporate financial advice and tax planning. It is focused on increasing its assets under management by continued growth of the business by an increase in the number of highly qualified fee earners for the provision of its industry leading specialisms.

 

It has a national presence with offices in Manchester, Birmingham, Cardiff, London and Leeds and has relationships and infrastructure in place to further grow its reach and target markets.

 

 

 

 

 

 

Chairman's Statement

 

 

When I reported on our 2017 annual results in early 2018, I outlined a programme of investment for 2018 of developing talent and new sales and marketing channels. The aim of this programme is to create growth and value for the medium term and with the client at the centre of everything we do.

 

Progress on investment strategy

We have invested in the region of £450k during the period which has increased the Group's cost base in the short term, but the return from these new investments has been slower to materialise than anticipated, which has led to slower revenue growth and profit progression than anticipated at the start of this year. In addition, the well documented changes in the Ogden rate, which has resulted in larger amounts paid out in personal injury and clinical negligence cases, has impacted the Group's performance. The increase in case sizes, has resulted in both the Company's sales cycles taking longer and the fee structures being altered. Also, there are smaller upfront payments to the Company on appointment. Despite these alterations, the Board reiterates that it believes the Company is outperforming most of its direct peers and continues to win a steady stream of new mandates.

We are now also starting to see the benefit of the Frenkel Topping Training Academy. Our Trainee Consultants are now becoming authorised individuals, so we will see some new revenue generators and asset gatherers deployed in H2 2018. Additionally, our first Graduates are approaching the end of their first year, the majority of whom have taken and passed the requisite benchmark qualifications and are all on track to complete the two-year scheme on schedule. We have also offered and had accepted a number of training contracts to new Graduates who will start their training scheme in October.

Notwithstanding this, our PBT before restructuring and share based compensation adjustments is £0.9m for H1 and as the new consultants develop their expertise and as clients respond to the increased marketing communications made in 2018 we anticipate revenues will increase. In the meantime, tight control of costs will be maintained so that the full benefit of the investments is enjoyed by the Group.

 

Our core business 

Although in Q1 we saw some client and asset attrition due to the activities of former consultants, new AUM added in 2018 is ahead of expectations and Expert Witness revenues are ahead of the same period in 2017 which is extremely promising as it is a very important barometer for the future as this is our pipeline for AUM growth as we go into 2019 and 2020.

Our investment management arm, Ascencia Investment Management, has started 2018 well, enjoying positive fund flows in 2018.  Ascencia Investment Management's innovative investment proposition, characterised by competitive fee structures with a capital preservation focus, has been well received by clients. All model portfolio strategies have achieved positive returns to 30 June against a backdrop of elevated geo-political risk and economic uncertainty.

Our fledgling general advice business, Obiter Wealth Management Limited, has seen some good traction in the first half of 2018 generating a number of law firms as clients advising both employees and partners on pensions and other general advice.

 

Dividend

In June 2018 the Company paid a final dividend in respect of FY17 of £0.6m.  This represents a total dividend for 2017 of 1.2203 pence per share (2016: 1.1094 pence) to shareholders.  The Company is pleased to announce that it will be paying an interim dividend of 0.32 pence per share (2017 Interim Dividend: 0.2969 pence), an 8% increase on the interim paid in 2017.  The interim dividend will be paid on 28 September 2018 to shareholders on the register at close of business on 14 September 2018 and the shares will trade on an ex-dividend basis from 13 September 2018.

The Company will continue with its progressive dividend policy that is supported by the growth prospects of the Company.

 

 

Outlook

I am pleased to say that the underlying fundamentals remain strong and sales are in line with 2017. Frenkel Topping is a strong business with a number of clear commercial advantages which we are intent on capitalising on as we continue to grow our business. The Board is positive about the Company's growth prospects which will be delivered through the three arms of our business: our core activities in Frenkel Topping; our general advice business, Obiter Wealth Management and our investment management arm, Ascencia. We remain focused on reaching AUM of £1bn and expect that that a combination of organic growth and focused acquisition strategy acquisitions will accelerate the growth of the business and strengthen the existing platform.

The Board expects the growth in our business pipeline and AUM added during the period to continue over H2 and confirms that it is trading in line with market expectations.

With respect to the Board, I was pleased during the period to welcome Tim Linacre to the Board as a non-executive director, who brings a strong blend of corporate finance, business communications and plc board expertise. In addition, today, I have moved to non-executive Chairman, as I feel this is more appropriate for the Company now that we have developed and implemented the strategy and culture for growing the business.

I would like to thank all of our staff and shareholders for their continued support and look forward to

providing further updates.

 

Paul Richardson

Non-Executive Chairman

5 September 2018

 

 

 

 

 

Frenkel Topping Group plc

 

6 Months

6 Months

Year

Group income statement

 

 

 ended

30-Jun-18

ended

30-Jun-17

ended

31-Dec- 17

 

 

Unaudited

Unaudited

Audited

 

Note

£'000

£'000

£'000

REVENUE

 

3,624

3,627

7,322

Direct staff costs

 

(1,560)

(1,337)

(2,561)

 

 

 

 

 

 

ADMINISTRATIVE EXPENSES

 

 

 

 

Share based compensation

 

(159)

(212)

(417)

Development and reorganisation costs

 

(449)

(25)

(300)

Formal sale and reorganisation costs

 

                -

(116)

(122)

Other

 

(1,209)

(1,219)

(2,409)

 

 

 

 

 

TOTAL ADMINISTRATIVE EXPENSES

 

(1,817)

(1,572)

(3,248)

 

 

 

 

 

Profit from operations before share based compensation and reorganisation costs

 

855

1,071

2,352

-      share based compensation

 

(159)

(212)

(417)

-      development and reorganisation costs

 

(449)

(25)

(300)

-      formal sale

 

 

(116)

(122)

 

 

 

 

 

PROFIT FROM OPERATIONS

 

247

718

1,513

 

 

 

 

 

Other gains and losses

 

                -

150

150

Finance Income

 

24

135

234

Share of profit of investments accounted for using the equity method

 

 _11

____-

      14

 

 

 

 

 

PROFIT BEFORE TAXATION

282

1,003

1,911

 

 

 

 

Income tax expense

 

PROFIT FOR PERIOD

 

ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED TO PROFIT AND LOSS:

Gains on property revaluation arising net of tax

 

TOTAL COMPREHENSIVE INCOME FOR PERIOD

 

(60)

 

222

 

 

 

-

       _____

    222

(248)

 

755

 

 

 

-

_____

     755

 

(379)

 

1,532

 

 

 

80

_____

  1,612

PROFIT AND TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

 

 

 

 

Owners of parent undertakings

 

   222

     755

   1,612

 

 

 

 

 

Earnings per share - basic (pence)

3

0.32

1.02

2.24

Earnings per share - diluted (pence)

3

  0.32

    0.96

     2.24

 

The results for the period are derived from continuing activities.
 

 

 

Frenkel Topping Group plc

 

 

 

 

Group Statement of Financial Position

 

30-Jun-18

30-Jun-17

31-Dec-17

As at 30 June 2018

 

Unaudited

Unaudited

Audited

 

 

£'000

£'000

£'000

ASSETS

 

 

 

 

NON CURRENT ASSETS

 

 

 

 

Goodwill

 

7,020

7,020

7,020

Property, Plant and equipment

 

1,402

1,263

1,406

Investments

 

25

-

14

Deferred tax

 

       53

    179

      31

 

 

8,500

8,462

8,471

CURRENT ASSETS

 

 

 

 

Accrued income

 

822

664

731

Trade receivables

 

1,358

1,202

1,330

Other receivables

 

210

392

275

Investments

 

1,202

1,000

118

Cash at bank and in hand

 

    558

3,847

1,816

 

 

4,150

7,105

4,270

 

 

   

 

 

TOTAL ASSETS

 

12,650

15,567

12,741

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

EQUITY

 

 

 

 

Share capital

Share Premium

Merger reserve

Revaluation reserve

 

393

400

5,315

151

385

361

5,315

71

393

400

5,315

151

Own share reserve

Other reserve

 

(4,449)

(341)

(774)

(341)

(4,449)

(341)

Retained earnings

 

  9,989

  9,669

10,253

TOTAL EQUITY

 

11,458

14,686

11,722

CURRENT LIABILITIES

 

 

 

 

Current taxation

 

223

275

139

Trade and other payables

 

   969

    606

    880

 

 

 

 

 

TOTAL LIABILITIES

 

1,192

881

1,019

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

12,650

15,567

12,741

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Changes in Equity For the period to 30 June 2018

 

Share Capital

Share Premium

Merger

Reserve

Other

Reserve

Own share

Reserve

Retained

Earnings

Revaluation reserve

Total Equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance 1 January 2017

385

361

5,315

(341)

(774)

9,347

71

14,363

Share based payments

-

-

-

-

-

212

-

212

Dividend Paid

-

-

-

-

-

        (644)

-

(644)

 

_______

_______

_______

_______

_______

________

________

________

Total transactions with owners recognised in equity

-

-

-

-

-

(432)

-

(432)

Profit for the period

-

-

-

-

-

755

-

755

 

_______

_______

_______

_______

_______

________

________

________

Balance 30 June 2017

385

361

5,315

(341)

(774)

9,669

71

14,686

New shares issued

8

39

-

-

-

-

-

47

Purchase of own shares

-

-

-

-

(3,675)

-

-

(3,675)

Share based payments

-

-

-

-

-

20

-

20

Tax credit relating to share option scheme

-

-

-

-

-

11

-

11

Dividend paid to shareholders

-

-

-

-

-

(224)

-

(224)

 

_______

_______

_______

_______

_______

_______

_______

_______

Total transactions with owners recognised in equity

8

39

-

-

(3,675)

(193)

-

(3,821)

Profit and total comprehensive income for the period

-

-

-

-

-

777

-

777

Other comprehensive income

-

-

-

-

-

-

80

80

 

_______

_______

_______

_______

_______

_______

_______

_______

Balance 31 December 2017

393

400

5,315

(341)

(4,449)

10,253

151

11,722

Share based compensation

-

-

-

-

-

159

-

159

Dividend paid to shareholders

-

-

-

-

-

(640)

-

(640)

Tax charge relating to the

 

 

 

 

 

 

 

 

 

Share option scheme

-

-

-

-

-

(5)

-

(5)

 

_______

_______

_______

_______

_______

_______

_______

_______

Total transaction with owners recognised in equity

-

-

-

-

-

(486)

-

(486)

Profit and total comprehensive income for the period

-

-

-

-

-

222

-

222

Balance 30 June 2018

393

400

5,315

(341)

(4,449)

9,989

151

11,458

 

=============

=============

=============

=============

=============

=============

=============

=============

                     

 

·      The share capital represents the number of shares issued at nominal price.

·      The merger reserve represents the cost of the shares issued to purchase the non-controlling interest at market value at the date of the acquisition and the excess of fair value over nominal value of shares issued to acquire Ascencia Investment Management (formerly Frenkel Topping Investment Management Limited.)

·      The other reserve represents the excess paid for the non-controlling interest over the book value at the date of the acquisition.

·      The own shares reserve represents the cost of 3,040,000 (31 December 2017: 3,040,000) shares held by the company and the 6,348,016 (31 December 2017: 6,348,016) held by the Frenkel Topping Group Employee Benefit Trust.  The open market value of the shares held at 30 June 2018 was £4,331,442 (31 December 2017: £5,069,529).

·      Retained earnings represents the profit generated by the Company since trading commenced, together with dividends paid, share premium cancelled and share based payment and credits.

 

 

·      The Company has conformed with all capital requirements as imposed by the FCA.

 

 

Frenkel Topping Group plc

 

6 Months

6 Months

Year

Group Cash Flow Statement

For the period to 30 June 2018

 

ended

30-Jun-18

ended

30-Jun-17

ended

31-Dec -17

 

 

Unaudited

Unaudited

Audited

 

 

£'000

£'000

£'000

 

 

 

 

Profit before tax

 

282

1,003

1,911

Adjustments to reconcile profit for the period to cash generated from operating activities

 

 

 

 

Finance Income

Other gains

Share based compensation

 

(24)

-

159

(135)

(150)

212

(234)

(150)

231

Depreciation

 

36

23

71

Share of profit of investments accounted for using the equity method

(11)

-

(14)

Decrease in accrued income,

trade and other receivables

83

80

40

(Decrease)/increase in trade and other payables

   (51)

      61

    210

Cash generated from operations

474

1,094

2,065

Income Tax paid

 

     -

 (112)

   (112)

Cash generated from operating activities

474

982

1,953

 

 

 

 

 

Investing Activities

 

 

 

 

Acquisition of property, plant and equipment

Acquisition of shares in joint ventures

Investment Purchases

Investment Disposals

Disposal of shares in investment

(31)

-

(1,061)

-

           -

(39)

-

-

2,235

     150

(132)

-

(4,468)

7,511

      150

Cash (used) / generated in investing activities

 

(1,092)

2,346

3,061

Financing activities

 

 

 

 

Shares issued

 

-

-

47

Own shares purchased

 

-

-

(3,675)

Dividend paid

 

(640)

(644)

(868)

Interest received on loans

 

           -

         -

      135

Cash used in financing

 

  (640)

 (644)

 (4,361)

(Decrease)/ increase in cash

 

(1,258)

 

2,684

 

653

 

Opening cash

 

  1,816

  1,163

  1,163

Closing cash

 

     558

  3,847

  1,816

 

 

 

 

 

 

 

 

 

 

 

Closing Cash and Cash Equivalents

 

 

 

 

Cash

 

558

3,847

1,816

Cash equivalents

 

   1,202

    1,000

          118

Closing cash and cash equivalents

 

  1,760

  4,847

  1,934

 

Cash is held at National Westminster Bank Plc.

Cash equivalents are held in liquid investments.

 

 

 

Notes to the Interim Financial Statements

 

1.    Basis of preparation and accounting policies


Basis of preparation

The Company's interim result consolidates the results of the Frenkel Topping and its subsidiary undertakings up to 30 June 2018.  Frenkel Topping is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The consolidated financial information of Frenkel Topping is presented in Pounds Sterling (£), which is also the functional currency of the parent.

 

The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. It does not therefore include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements as at 31 December 2017 which have been prepared in accordance with IFRS's as adopted by the European Union.

 

The financial information for the 6 months ended 30 June 2018 is also unaudited.

 

The Company's statutory accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The report of the auditors on these accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

 

The Company has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Companies, in the preparation of these interim financial statements.

 

The Company has also considered the provisions of IFRS 9 Financial Instruments and has concluded that it has no effect on the valuation of its assets and its liabilities shown in its balance sheet.

 

The Company has also considered the provisions of IFRS 15 Revenue from Contracts with Customers and has concluded that it has no significant effect on the Company's approach to revenue recognition.

 

Significant accounting policies

The accounting policies used in the preparation of the financial information for the six months ended 30 June 2018 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') as adopted by the European Union and are consistent with those which will be adopted in the annual statutory financial statements for the year ended 31 December 2018.

 

2.            Revenue Segmental Reporting

All of the Company's revenue arises from activities within the UK.  Management consider there to be only one operating segment within the business based on the way the business is organised and the way results are reported internally.

 

 

 

3.            Earnings per ordinary share

 

 

6 months

6 months

Year ending

To be updated by ECG

June 2018

June 2017

December 2017

Earnings

 

 

 

Earning for the purpose of basic earnings per share (net profit for the period attributable to equity holder of the parent)

£222,186

£754,686

£1,531,837

Earning for the purpose of diluted earnings per share

£222,186

£754,686

£1,531,837

Number of shares

 

 

 

Purpose for basic earnings per share

 

Less: own shares held

77,785,203

 

(9,388,016)

----------------

68,397,187

76,990,683

 

(3,128,016)

----------------

73,862,667

77,785,203

 

(9,388,016)

--------------

68,397,187

Effect of dilutive potential ordinary shares - share options

-

4,565,322

-

 

---------------

---------------

----------------

Purpose of diluted earnings per share

68,397,187

78,427,989

68,397,187

 

---------------

---------------

---------------

 

 

 

 

Basic EPS pence

0.32

1.02

2.24

Diluted EPS

0.32

0.96

2.24

 

4.            Dividend

A dividend of £639,632 representing 0.9234 pence per share was approved by the Shareholders at the AGM on 30th May 2018.  The dividend was paid on 29th June 2018.

 

5.            The Board of Directors approved the interim report on 4th September 2018.
 

6.            Copies of this report are available from the company website on www.frenkeltopping.co.uk

 

7.            The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014

 

 

- Ends -


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Interim Results - RNS